Friday, May 26, 2017

New Delhi: India has removed or relaxed foreign investment caps in several sectors since last year and one such sector is domestic airlines. So as of today, a foreign airline can pick up 49 percent equity in an Indian carrier and then also collaborate with an investment firm from parent country to pick up the remaining 51 percent, effectively owning 100 percent of an airline in India. This proposal has been opposed tooth and nail by incumbent Indian airlines SpiceJet, IndiGo, Jet Airways and Go Air under the aegis of the Federation of Indian Airlines (FIA).
This airline lobby group was also similarly opposed to the entry of Singapore Airlines and AirAsia BhD in India earlier – both forged separate partnerships with Tata Sons to set up two new airlines from scratch, when the FDI caps were relaxed in the first round in 2012. At that time, the FIA had used every available means to thwart the Tatas’ plans and though both airlines did eventually get established, the matter is still pending resolution in the courts.
Now, when Qatar Airways has been hinting at starting an airline from scratch in India by using the newly opened 100 percent FDI route (along with Qatar Investment Authority), the FIA has upped the ante again. This time, the FIA has raised some valid points and the government would do well to listen to what it has to say. Why allow a powerful global airline, with deep pockets and a vast network, to come to India and provide unnecessary competition to local airlines when the latter are already suffering in a high-cost and hostile operating environment?
Besides, there has been growing rivalry between the powerful Gulf airlines and those from Europe and the USA on global routes, with non-Gulf airlines closing ranks against the rapidly advancing Gulf carriers. Why should India open its arms to airlines from the Gulf?
In a fresh letter to the government, the FIA has raised some valid points against allowing 100 percent foreign investment in airlines.
25/05/17 Sindhu Bhattacharya/First Post